The Federal Energy Regulatory
Commission today conditionally accepted the Midwest Independent Transmission
System Operator Inc.’s
(Midwest ISO) open access Transmission and Energy Markets Tariff
(TEMT), and further directed the ISO to implement safeguards to
ensure additional protection for wholesale customers during its
transition to a fully-functioning energy market in 2005.

Further
development of the Midwest ISO opens the way for increased system
reliability and competition in the broad region that extends
from eastern Montana through the upper Midwest and south to parts
of Kentucky and Missouri. The area covers more than 96,000 miles
of high voltage transmission lines and also includes the Canadian
province of Manitoba.

The Commission has been actively working
with, and providing guidance to, the Midwest ISO and other stakeholders
and affected
parties in developing all the elements necessary for a reliable
and competitive wholesale power market in the15-state region.
The Commission granted regional transmission organization (RTO)
status to the Midwest ISO in December 2001.

The TEMT contains
the terms and conditions necessary to implement a market-based
congestion management program and energy spot
markets. This includes a Day-ahead energy market and a Real-time
energy market, locational marginal pricing (LMP) and a market
for Financial Transmission Rights (FTRs)

The energy markets tariff
incorporates the major features used successfully in three eastern
Independent System Operators – PJM
Interconnection, L.L.C. (PJM), New York Independent System Operator,
Inc. (NYISO), and ISO New England (ISO-NE).

These features include
centralized security-constrained economic dispatch, LMP and market
power mitigation.

The Commission noted
that the Midwest ISO does not have a history of centralized power
pool dispatch, as do the three eastern ISOs.
In order to address this unique feature, and in light of studies
undertaken as a result of the August 2003 blackout, the Commission
directed the Midwest ISO to implement additional safeguards.

Today’s
order calls for additional oversight and reporting requirements
regarding reliability and readiness standards. The
Commission also put in place mitigation measures to limit any
potential price impacts during the early phases of market implementation.
In addition, the Commission established measures to provide market
participants in load pockets with enhanced protection against
congestion charges associated with remote network resources or
system purchases from outside of existing load pockets.

The Commission
accepted the TEMT’s proposed FTRs allocation
plan with modifications. The primary objective of the initial
FTR allocation is to hold existing transmission customers harmless
and to ensure that customers under existing contracts continue
to receive the same level of service. The Midwest ISO proposes
to allocate FTRs to eligible entities as part of the conversion
of existing open access transmission tariff network and point-to-point
service to TEMT service. The Commission augmented the proposal
to ensure that market participants receive sufficient FTRs
initially and are able to subsequently adjust their FTR levels
based on market experience.